7.0.0 Introduction to purchase procedure :
We are purchasing out of public exchequer and therefore we have to take precautions that public money is most efficiently used and we get best value of the Rupee. To meet this objective and also comply with purchase policies of Government of India, we have designed the purchase procedures in such a manner that we are able to meet these basic objectives and at the same time, are able to follow various policy guidelines of Government of India on purchase matters. The procedure should also ensure that purchase action is initiated against all the demands sent to purchase office and all avoidable delays in purchases are eliminated. Purchase procedures followed on most of the Railways is described in the following paragraphs.
7.1.0 Receipt and Registration of Demands :
All the requests for purchase of materials are known by the name ‘Demand’.
- A stock recoupment sheet or
- Estimate sheet submitted by the Stores Depot for recouping a stock item or
- It may be a requisition received directly from the user department which, mostly, is for a non-stock item (but in some exceptional cases, there may be direct requisition even for a stock item).
- All these demands are received in COS’s Office in a separate section known as ‘Central Registration Section’. On some of the Railways, there may be separate sections to receive estimate sheets/recoupment sheets submitted by the depots because, they have to be compiled in one purchase case before initiating purchase.
- On receipt in Central Registration Section, all the demands are scrutinized to see that they are duly signed by the competent authorities and required information such as Description, Quantity, Consignee Allocation, funds’ certification are clearly indicated and also vetting of associate finance, wherever required has been obtained.
- All these demands are then entered in a register which is maintained purchase section-wise. All the demands which, prima- facie, appear incomplete, are returned to the indentors for furnishing complete information and the remaining are forwarded to respective purchase sections.
7.1.1 The Demand Registration No. : It is given by central registration section is of eight digits.
First two digits indicate code of purchase section in which the purchase will be dealt,
Next two digits indicate year of registration and
Last four digits indicate serial number of registration under that purchase section.
To distinguish direct demands from estimate sheets/recoupment sheet received from depots, all estimate sheets / recoupment sheets submitted by the depot for stock items are registered from Serial Number 0001 to 4999 and the demands registered for SL. No. 5000 onward are for the requisitions submitted by the indentors.
7.1.2 Allotment of Registration no: This demand registration no. is advised by the central registration section to respective stores depot or indentor, as the case may be, with the advice that this number should invariably be referred in all future correspondences.
7.2.0 Preparation of purchase proposal :
7.2.1 When the demand has been received in the purchase section, action to arrange the material is initiated. First of all, it is checked up whether the demand can be met with inactive / surplus / overstocks available on other Railways/production units. If so, a requisition or final purchase order is placed on the concerned Railway / Production unit. It may also be possible that demand of one depot may be met with overstock in other depot and in that case, a depot transfer order may be issued.
7.2.2 If the item is DGS & D or Railway Board item or it is to be arranged through some other centralized purchase agency, then an indent is sent to that agency. On some Railways, there is separate Indent section for preparation and follow up of indents.
7.2.3 If the item is available on DGS & D rate contract or rate contract finalized by any other centralized agency, which can be operated by COS, supply order is placed against the rate contract. If the parallel rate contracts exist in favor of many firms, the particular firm on whom the order is to be placed is selected on the basis of its performance and comparative rate.
7.2.4 If the material cannot be arranged by any of the above methods, then direct purchase is initiated. First of all, a purchase proposal is prepared which contains basic details of demand (requisition or estimate sheet). At this stage, it is also seen whether any other demand for the same item is pending for initiating purchase action. If so, that demand is also clubbed with correct case to get advantage of buying in bulk quantity. In a purchase proposal, details of last successful purchase are invariably furnished because estimated value of purchase is worked out on the basis of last purchase rate after taking other factors also into consideration.
7.2.5 This purchase proposal is then put up by the purchase section to the respective purchase officer, depending upon purchase powers and estimated value of purchase of that particular item. As per present delegation, COS is empowered to authorize and sanction purchases up to Rs.1 Crore, CMM up to Rs.50 lakhs, Dy. COS up to Rs.5 lakhs, Senior Stores Officer up to Rs.75,000 and an ACOS up to Rs.25,000. However , these delegations may vary from Railway to Railway.
7.3.0 Decision on Method of Purchase and Mode of Tendering :
7.3.1 When the case is put up to purchase officer, he has to decide about the method of purchase. Our normal method of purchase is through tender system and therefore, purchase officer will pass orders in the file for mode of tendering out of three modes of tender systems. If the orders are being passed for inviting limited tenders, then the purchase officer will also specify whether the item is to be included in weekly stores bulletin or separate tender inquiries are to be issued. If separate tender inquiries are suggested, then panel of firms to whom tender inquiries are to be sent is also to be approved. Similarly, in case of single tender, name of firm to whom single tender is to be issued is also to be approved.
7.4.0 Tender Invitation :
7.4.1 After obtaining orders from purchase officer, tender documents are prepared. If open tenders are to be issued, then a tender notice is prepared and sent to Chief Public Relations Officer for publication in the newspapers. Tender documents are then forwarded to the centralized tender section for sale to firms on payment. If the item is to be included in the Weekly Stores Bulletin, then information on the prescribed proforma ,is prepared and sent to bulletin section for further compilation. Ordinary or special limited tender inquiries are directly dispatched to suppliers by Registered AD or under postal certificate (UPC).
7.4.2 All the tenders, irrespective of their type, bear due date and time by which offers should be submitted.
7.4.3 After this, purchase case is transferred to tender section for further dealing.
7.5.0 Opening of Tenders :
7.5.1 On the due date and time, tenders are opened. There is an elaborate system for tender opening to ensure that all the tenders submitted by the firms are properly linked in the respective cases and any additions or alterations after opening of the tenders are not possible.
7.5.2 All advertised tenders and special limited tenders (tenders in which estimated value of purchase is more than Rs. 3 lakhs) are opened in public and firms’ representatives who want to be present during opening are allowed to be present.
Such tenders, should be opened by a Gazetted Officer from Stores Department and at least a Section Officer from Accounts Department.
All limited tenders are opened by a Chief Clerk/Head Clerk from Stores Department and a Senior Clerk from Accounts Department. At the time of opening of these tenders, firm’s representatives are
not allowed to be present.
7.5.3 After opening these are signed by the tender opening officials on each page and all financial aspects are encircled, overwriting etc. are also attested. Then the tenders are sorted tender case-wise (please note that at this stage, Demand No. is generally referred as Tender No. on some Railways)
7.5.4 After sorting, tenders are linked in the respective tender cases and then they are transferred to respective purchase officers. However, in all the cases in which lowest tender is valuing more than Rs.2 lakhs, detailed abstract of all tenders (also known as tabulation statement) is prepared and also got vetted from Accounts department.
7.5.5 After this, the tender case is passed on to respective purchase officer on the basis of value of lowest tender.
7.6.0 Decision of Tenders :
7.6.1 The tenders are now to be decided to either accept the suitable offer out of all the tenders received or reject or file them. All the tenders in which acceptable offer is less than or equal to Rs. 3 lakhs can be decided by the respective purchase officer as per the purchase powers delegated to him but, if the acceptable offer is valuing more than Rs. 3 lakhs, then the tenders have to be discussed by a tender committee consisting of 3 officers, one from Stores Department one from consuming department and one from Accounts Department. From Stores and consuming department, officers below the rank of senior scale cannot be the members of a tender committee and Accounts member is generally one grade lower e.g., tenders valuing from Rs. 3 to 8 lakhs are discussed by senior scale officers from Stores and consuming department and an Asst./Junior scale officer from Accounts Department. Tender Committee is always a recommending body and its recommendations have to be accepted by a competent accepting officer.
7.6.2 Some of the points to be kept in mind for deciding tenders are as under:
(a) The offer should be technically suitable i.e. the material offered by the firm should be exactly as per our specifications given in the tender inquiry. Offers of substandard materials are normally ignored;
(b) Out of all technically suitable offers, lowest offer is examined for reasonableness of rates.
(c) If the rate of lowest technically suitable offer is considered reasonable, then it is to be seen whether delivery offered by the firm will meet our requirement with respect to delivery period and
place of delivery.
(d) After satisfying about (a), (b) & (c) above, we see that the firm is reliable and has satisfactory record of past performance.
(e) Finally before accepting the offer, we see that all terms and conditions offered by the firm are acceptable. We normally, place all our purchase orders as per ‘Indian Railways Standard (IRS) Conditions of Contracts.’ As per these conditions, we have right to reject the substandard materials, levy liquidated damages for delayed supplies, make risk purchases, etc.
7.7.0 Placement of Purchase Order :
7.7.1 When the tenders have been decided, purchase officer records acceptance on the tender accepted by him and then the purchase case is passed on to the respective purchase section for preparation of purchase order.
7.7.2 After the purchase order has been signed by the purchase officer, it is sent to Accounts Department for pre-check if the value is more than Rs.40,000/-. 7.7.3 All purchase orders issued against demands submitted by Stores Depots for stock items, availability of funds out of purchase grant is to be ascertained from Accounts Department. For this purpose, Accounts Department is maintaining an up-to-date liability register. At the time of issue of purchase order, value of purchase order is posted in liability register and a funds certificate is recorded on the purchase order.
7.7.4 Finally, the purchase order is numbered. Purchase Order Number. consists of 16 digits out of which first 8 digits are same as Demand No. or Tender No., 9th digit indicates mode of purchase, 10 th to 14th digits are serial number which are allotted paying authority-wise, 15th & 16th digit indicates serial No. of the item, consignee, delivery date if there are more than one item, consignee, delivery dates respectively in the purchase order.
7.7.5 After numbering, the purchase order is dispatched to suppliers by registered post with Acknowledge Due.
7.8.0 Contract Administration :
7.8.1 The purchase activity is not over only on placement of purchase order. For getting the material in time, contract has to be properly administered. Immediately on placement of orders or after some time, we may get request from supplier for amending some of the clauses of the purchase order. All these requests have to be examined in proper perspective and amendments (or modification advises) against the purchase orders are issued. For all the amendments which may result into financial repercussions, we may have to take finance concurrence.
7.8.2 If the supplier is not able to supply the materials within the stipulated delivery period, then as per law of contract, contract expires. Further extension has to be with mutual consent. Normally suppliers request for extension of delivery date and this is examined keeping all relevant factors in mind. As per IRS conditions of contract, we have right to recover liquidated damages for any loss or inconvenience suffered by us due to delays in supply of material.
7.8.3 Sometimes, firms fail to supply the materials. As per IRS conditions of contract, if the firm fails to supply the material, we can purchase the material from the alternative sources at the risk and cost of the supplier i.e. if we pay any higher prices to the alternative source, the difference can be recovered from the defaulter. These purchases from alternative sources are known as Risk Purchase. In order to ensure that risk purchase is legally tenable, we have to follow certain procedures by which
reasonable opportunity to make good the loss is given to the supplier and the risk purchase has to be arranged within a reasonable time (which is normally 6 months) from the date of breach of contract.
7.8.4 Arbitration : Sometimes disputes may arise in the execution of the contracts. If the dispute can not be mutually settled, then as per IRS conditions of contract, it is to be referred to a sole arbitrator appointed by the General Manager and decision of the arbitrator will be final in such a case.
7.9.0 Supply of materials :
Materials against purchase orders placed by Controller of Stores are supplied to the consignees mentioned in the purchase order. Material received can be pre-inspected by inspecting agencies like RITES, RDSO, DOI or can be got inspected on receipt. Decision for acceptance or rejection of the material is conveyed to the supplier, COS Office, Bill passing agency etc., through issue of vouchers like Receipt Notes, passing of bills, Rejection advice etc.
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